Regulatory Alerts2011-03-14
Added · Updated
Instructions for Granting Medium-Term Loans to Licensed Banks No. 54/2011
The Central Bank of Jordan issues Instructions No. 54/2011, effective until March 2012, permitting licensed banks to obtain medium-term loans up to five million dinars at the prevailing rediscount rate. Loan limits are capped at 5% of a bank's total direct facilities in Jordanian Dinars, with a maximum renewal period of five years, subject to Central Bank approval for excess amounts. Licensed banks must re-lend these funds exclusively to industrial entities and are prohibited from using them to settle existing facilities or raising agreed interest rates with customers.
In the Name of Allah, the Most Gracious, the Most Merciful
[Logo of the Central Bank of Jordan]
Number: 4/3296 Date: 9 Rabi' al-Thani 1432 AH Corresponding to: 14 March 2011 AD
Instructions for Granting Medium-Term Loans to Licensed Banks No. (54/2011)
Based on the provisions of paragraph (b) of Article (41) and paragraph (a) of Article (44) of the Central Bank of Jordan Law No. (23) of 1971 and its amendments, and in implementation of the provisions of Article (39/b) of the same Law, and within the framework of the Central Bank of Jordan's commitment to providing medium-term financing to licensed banks with the aim of re-lending to the industrial sector and contributing to strengthening economic growth in the Kingdom, I hereby decide the following:
First: 1- The Central Bank may grant loans to licensed banks for a period not exceeding nine months at the prevailing rediscount rate on the day the loan is granted, such that the amount of a single loan does not exceed five million dinars. The existing balance of the granted loan may be renewed after it is extinguished for a similar period upon request by the licensed bank, with a maximum limit of five years at the same interest rate fixed at the time the loan was first granted. 2- The upper limit for the total loans that may be granted to a single bank shall be 5% of the bank's total direct facilities granted in Jordanian Dinars as per the last monthly statement of assets and liabilities available on the date the bank submits its application to obtain a loan from the Central Bank. 3- A licensed bank may exceed the percentage mentioned in item (2) above, provided that prior written approval is obtained from the Central Bank.
1 P.O. Box 27, Amman 11118, Jordan • Tel: 01 303634 • Fax: 01 888364, 01 379396, 01 379396 • Website: www.cbj.gov.jo • E-mail: info@cbj.gov.jo Form (1/1/09)
CENTRAL BANK OF JORDAN البنك المركزي الأردني
Second: The loans mentioned above must be re-lent to industrial companies and/or institutions (according to the concept adopted by the Ministry of Industry and Trade), to finance industrial activities exclusively, according to the following procedures: 1- All loan applications to the Central Bank must be submitted by licensed banks according to the form prepared for this purpose at the Central Bank, indicating the following: a. Reasons for the loan request. b. Value of the loan. c. Term of the loan. d. Type of guarantees provided and their value. e. Authorization from the licensed bank to the Central Bank to debit the value of the loan and any accrued interest from the current account of the licensed bank on the due date. f. Any additional information or data requested by the Central Bank or deemed necessary to make a decision on the loan application. g. The licensed bank undertakes to provide whatever the Central Bank deems appropriate at any time to enhance the guarantees provided for the loan. 2- If the Central Bank rejects any of the guarantees and documents provided for any reason, they shall be returned to the licensed bank as soon as possible to enable it to submit new documents or a new application. 3- The Central Bank shall issue its decision on loan applications within a period not exceeding three working days from the date of receipt, if they meet all required conditions. 4- The Central Bank may reject any application for a loan and reject any document or any of the guarantees provided without stating the reasons.
2 Form (1/1/09)
CENTRAL BANK OF JORDAN البنك المركزي الأردني
a. Using any funds available in its other accounts at the Central Bank to settle the amounts due. b. Using any government securities or government-guaranteed securities and/or certificates of deposit issued by the Central Bank and available in its portfolio at the Central Bank to cover the outstanding balance, its fixed interest, and any expenses and commissions incurred by the Central Bank in the collection process. 2- A licensed bank may repay any part of the loan before the due date, provided that the amount repaid is not less than ten thousand dinars; however, repayment of less than this amount is permitted provided that prior approval is obtained from the Central Bank. 3- In the event that the loan balance is repaid before the due date, the interest accrued on the outstanding balance of that loan shall be recorded on the date of repayment. 4- The documents attached to the original application and kept as collateral for the loan shall be returned upon repayment. 5- The Central Bank may request the repayment of the outstanding balance of any loan at any time, provided that the licensed bank is notified thereof two weeks before the repayment date, and the licensed bank undertakes to repay immediately upon such request.
Sixth: The bank is responsible for ensuring the following: a. That the loans granted to it under these instructions are re-lent exclusively to finance industrial activities. b. That the loans granted to it are not used for the purpose of settling existing facilities at its own bank or at any other banks.
Seventh: Despite any contrary agreement, the bank is prohibited from raising the agreed interest rate with the customer on the date the facility was granted.
Eighth: The Central Bank may take any of the measures or impose any of the penalties stipulated in the law in the event that the bank violates the provisions of these instructions.
4 Form (1/1/09)
CENTRAL BANK OF JORDAN البنك المركزي الأردني
Third: Guarantees provided by licensed banks: 1- The guarantees that the Central Bank may accept must meet the following: a. They must be issued in Jordanian Dinars. b. They must be among the guarantees stipulated in items (2), (3), and (4) of paragraph (a) of Article (39) of the Central Bank Law No. (23) of 1971 and its amendments. 2- Loans are granted against guarantees acceptable to the Central Bank at a ratio not exceeding: a. 85% of the value of the guarantees provided according to item (2) of paragraph (a) of Article (39) mentioned above. b. 90% of the value of the guarantees provided according to items (3) and (4) of paragraph (a) of Article (39) mentioned above. 3- The guarantees provided to the Central Bank may differ from the guarantees provided by industrial companies and/or institutions to the licensed banks. 4- The guarantees provided must not contain any discrepancies in their data regarding the amount, due date, or any other data. 5- The guarantees provided must be properly signed. 6- The due date of the guarantees must be consistent with the term of the loan. 7- The guarantees provided must clarify the reason for their creation where possible.
Fourth: Interest accrued on loans granted to licensed banks shall be recorded monthly in their current accounts at the Central Bank, according to the terms of granting these loans and their due dates.
Fifth: Repayment of loans: 1- The licensed bank undertakes to pay the loan installments on their due dates, and monthly interest is calculated on the outstanding balance of the loan value. If the balance of the bank's current account at the Central Bank is insufficient to settle the loan value, the licensed bank irrevocably authorizes the Central Bank to do the following:
3 Form (1/1/09)
CENTRAL BANK OF JORDAN البنك المركزي الأردني
Ninth: These instructions shall come into effect from their date until the end of March 2012, and anything inconsistent with them is repealed.
Please accept our highest regards,
[Signature] Governor Fares Abdul Hamid Sharaf